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- Long Term Investing Made Simple
I have been a long term investor since day 1, but what exactly does long term investing mean?
In simple terms it just means that short term movement in the markets do not worry me. Long-Term investors care about life time averages of mainly ETF's and Indexes.
So think of it like this, when stocks go up and down drastically in price because some "event" happens, most long term investors do not care. In fact they will likely be doubling down on their positions and buying in at even lower price point.
For me the thought process is simple, I do not need these funds for the next 30 years, so why not place them into ETF's that have averaged a solid return since their inception. This is about as close to a guaranteed return as I can find short of buying bonds.
If you don't find a way to make money while you sleep, you will work until you die
If this concept is something that is completely new to you, let me give you examples
$VOO S&P 500 ETF current price is $365, $VOO has a 9.73% compound annual return
$VTI Total Stock Market ETF $200, $VTI has a 9.79% compound annual return
$VGT Information Technology ETF $342, $VGT has a 12.6% compound annual return
Those 3 examples are just a few that I have been invested in for quite some time. By no means is this all of them, or am I telling you to buy these. Just wanted to simply share you with you my strategy and a couple of popular examples.
Thousands of experts study overbought indicators, head-and-shoulder patterns, put-call ratios, the Fed’s policy on money supply…and they can’t predict markets with any useful consistency, any more than the gizzard squeezers could tell the Roman emperors when the Huns would attack.
Long term investing comes down to 3 main things in my eyes
Quality - You must have a quality investment if you plan on holding this investment for an extended period of time and want to see some sort of substantial gain on your money. Quality of your investment is by far the most important. You don't want to be making a high risk play if you plan on holding that stock/etf for 5+ years. That doesn't make sense.
Diversify - In my opinion this important. Some long term investors hold onto to one thing for 25 years and thats it. They don't diversify their portfolio at all, but I am not that way. I believe in holding a multitude of different investments and long term accounts are just one of those. Diversify.
Time - Time when you are a long term investor could be argued as the most important factor. The longer you can leave your money in the market compounding year after year the higher chance you have to a larger gain. Time in the market is always better than trying to time the market.
Far more money has been lost by investors trying to anticipate corrections, than lost in the corrections themselves.
If these are topics that interest you then fell free to follow along on Twitter. I go over topics like these daily!